Monthly Archives: October 2014

Indians holding Indian passports are investing in residential property in the US and real estate analysts say top executives in Bangalore’s technology industry are the biggest spenders. The criteria is that if you have a visa lasting for 6 years and a good credit rating you can buy a home in the US without having immigration status. Banks provide loans at an interest rate of 3.5% -3.75%. Indian have invested a staggering $3.9 billion to buy homes in the US.

Indians spent $459,028 for their home purchase in the US, and this is way below the prices of premium homes in India’s top metro markets like Mumbai, Delhi-NCR, Chennai and Bangalore.

Since a large number of homes in the US belongs to the institutional investors who purchased them from owners during the crisis years from distressed sellers, it is easy for a foreign buyer to buy a home from theses institutions that from a house owners. Observers say that Bangalores large senior management in IT and technology are the top spenders on real estate in America, and many Indians continue to buy property in the US for reason like better valuations, portfolio diversification, and personal reasons like children studying in the US.

Chennai corporation will digitally map 426 sq km of the city and this is a massive exercise, in terms of positioning each and every road, trees, pipelines, hospitals and schools. This may require re-assessing of buildings, identify commercial activities carried out in residential areas and boost he revenue of the corporation. This project will also boost the property tax of the corporation and will provide information and coordinates to help government agencies.

The TamilNadu state Government has digitally mapped 17 cities and towns and that includes Coimbatore, Madurai, Salem and even municipalities like Ooty. The public will also have access to the maps conditionally. The project will use Geographic Information System which will display all, information superimposed on satellite images and these images may even include sewer holes, water bodies, ATMs, Banks and marriage halls. Every ward and zone will display its population and the number of streets etc.

Digitized maps can identify pipelines, cables and drains enabling civic work to be carried on better and faster. It will also give data on land acquisition for infrastructure development and also help speed up such work.

A unique concept of Corporate cluster homes have developed in Chennai and this largely due to the presence of huge MNCs and also the smaller players. Their presence has brought about the need for housing for people who have lived in a certain ambiance and are used to it. Certain MNCs have been proactive in developing ready-made homes for their employees who shift to Chennai , keeping in mind their lifestyle.

The developing corridors of East Coast Road, Old Mahabalipuram and Perungudi are the chosen localities for developing villas and luxury life spaces for the expats who come to Chennai on work. Some of the CCH have been developed under a 100-year lease contract between MNCs and the developers, with an exclusive agreement to sell the homes to company approved buyers only. Some MNCs also jointly develop corporate housing complexes for their employees.

This also requires social infrastructure to be developed, schools ad colleges for the industries to survive and bring in more people. There are plans to develop a 1000 acre area divided into clusters where common infrastructure will be tailored to suit the needs of the expat community in Chennai, addressing country specific differences.

Building Information Modeling is the development and use of a computer software model to stimulate the construction and operation of a facility. A BIM is data rich, object oriented, digital representation of the facility from which data and views of various users can be extracted and analyzed. The information can be used to make decisions and improve the process of delivering and managing the facility.

Surmount Energy is a leader in Green Building Consulting, Home Automation Solutions and CCTV & Surveillance system.It serves about 2.2 million sq mts of space in India currently. TATA housing has chosen Surmount energy for BIM Consultancy for the proposed residential project in Kolkata.

The automated solutions are offered under the brand name ‘ BuildTrack’ and it is designed to meet safety, comfort and convenience needs in residential and commercial and retail buildings and facilities.

The Government has relaxed norms for allowing Foreign Direct Investment (FDI) in the construction development sector and the minimum built-up area to attract FDi was reduced from 50,000 sq metres to 20,000 sq metres and the capital requirements was decreased from $10 million to $5 million. An investor may exit the project on completion of the project or after 3 years from the date of investment. Further, at least $5 million of the FDI needs to be brought in within six months of the commencement of the project – the date of approval of the building/ layout plan by the authority.

The cap on FDI remains unchanged and the government has clarified that 100% FDI through automatic route is allowed in the sector which includes townships, housing, commercial premises, hotels and hospitals and is not allowed in construction of farm houses and trading in transferable development rights. The permission to sell the completed units to foreign investors will help Indian developers get liquidity into the system. 100% FDI is permitted under automatic route is permitted in completed projects for operation and management of townships, malls/ shopping complexes and business centres. For this purpose developed plots will mean plots where trunk infrastructure including water supply, street lighting, drainage and sewage are made available.

Also, ‘real estate business’ for this purpose means dealing in land and immovable property with a view to earning profit or income and does not include development of townships, construction of residential/commercial premises, roads or bridges, educational institutions, recreational facilities, city/regional level infrastructure, townships.

Following the government’s announcement, the shares of the real estate developers are up by 2-6%.

Sample flats are the most potent marketing tools developers use to create to sell a dream to the home buyer. Buyers are carried away by the posh, spacious sample flat and some of them do get a surprise when the actual flat they have booked is delivered to them.

To make these sample flats look visually appealing some developers make custom made furniture to make the flat look spacious and to lure in the buyers.

Here are some other points to note while you consider buying an apartment:

1. The location of the sample flat may differ from the actual location of the unit booked by you. Hence views from windows and and balconies will differ.

2. the sample flat may have more space, higher ceiling etc. than the actual one booked

3. Walls of the sample flat may be made of glass, partitions may be created to induce a feeling of space and better finish. Sometimes doors are removed to create a feeling of greater space.

4. Sample flats have a posh look due to the usage of plywood, gypsum and prefabricated bricks, and these together with custom made furniture may create a optical deceit. Similarly, sample flat will have high end fixtures, lighting and hidden air conditioning ducts.

What buyer need to understand is that the sample flats are are showcases, meant to incite interest and indicate the lifestyle potential of the unit. It show cases how space could be utilised and can make a difference in the decision making of the buyer. It establishes the difference between real and perceived value of the unit. it is always advisable to take opinion from specialists before making your payment to ensure that you get the value for your payment.

One should be aware of the fact that there are wide variations within and across countries, when it comes to property measurements. India follows international standards when it comes to weights and measures and distances, but this does not hold good when it comes to calculation of areas especially for property.

The issue is not in the measurement of square yards, hectares or acres but in the calculation of built space, which is the area to be measured for calculation of stamp duty and market value. Every city in the country has a different norm for Floor Space Index (FSI) which reflects in the calculation of the super built up area and gross leasable area. Here please note that the carpet area definition remains same across cities.

There are variations in FSI calculations as well. In Mumbai, balcony and flower beds are nor considered while calculating FSI , but are charged a premium from the builder under fungible FSI. In cities like Hyderabad everything is included in FSI calculation.

The concept of super build up areas are included to measure swimming pools, stairs, common areas and pavements, India. Things are not different in other countries like Australia or the Middle east. In some of these places floor spaces includes parking lots not physically adjoined to the property, as well.

In India, measurement of land has inconsistencies across states due to the prevalent unit of measurement used to sub-divide land. There are variations in the sub-divisions too. For example, In Assam, one acre=3 bighas and 8 chains, and the same in Bihar is 1 bigha. In Haryana it is 4 bighas..etc. Certain states measure acre in decimals where one acre =100 decimals in certain cases and 1000 decimals in other places.

Again, all states do not use FSI for calculation. Some states use FAR (floor area ratio). In Tamilnadu, Gujarat and Maharashtra buitup area is in proportion to land holding. So if the plot area is 2400 sq ft, then FSI is 1.5 and the maximum constructed area would be 2400*1.5=3600 sq ft.

In the FAR concept which is prevalent in Kerala, Assam, Delhi, Haryana and other states, for FAR 1.5 and plot coverage ratio 75 percent, not more that 1800 sq ft can be constructed on each floor for the same 3600 sq ft. built up area. This shows that only 2 floors can be constructed under FAR concept while under FSI there can be any number of floors subject to restrictions.

Such inconsistencies have an impact on property valuation in the absence of a common standard. This also reflects in the stamp duty and registration charges collected by the Government. The International Property Measurements Standards or IPMS is taking the initiative in coalition with 28 organisations globally to freeze on measurement standard for office space initially and then residential space later on.

The challenge is to get the Government approve the standards, which will ensure that the buyer and seller are valuing usable space accurately and calculating value correctly ensuring transparency, attracting more investments in to the real estate sector.

NRI’s invest in their homeland so that they have an option of coming back and settling in India. There are several questions asked by the consumers regarding property investment options for their children and relatives. Here are some key points that would help make investments easier.

In most cases pre-approved loans are available based on the submission of key documents which are:

-valid passport copies and visa copies

-POA document on the bank’s format signed by applicants

– copy of the current appointment letter or salary certificate mentioning date of joining, designation, current salary and name of the company

– copy of previous appointment letters

– Last 3 months salary slip for fixed salary

– Bank statements for the last 6 months

The NRIs can purchase property in India, both residential and commercial and there is no restriction to the number of properties they can buy. They cannot, however, invest in agricultural land and farm land and plantation property. But they could have such property if gifted or inherited. Talking about funds, FCNR (Foreign currency non resident), NRE (Non resident external), NRO (Non resident ordinary) accounts can be used to remit the funds, as these are regular channels for transfers.

Taxation and legal advisory team in Ikia Consulting services share their views on the tax on sale of property by NRI’s. Sale proceeds from property sales in India can be invested by an NRI, in residential property outside India to save capital gains tax. Taxes can be saved if the new property is registered in the name of the person who receives the capital gain. In case of joint ownership the new property has to registered in the joint name.

Any expenses incurred on the renovation of the property would constitute as a deductible amount while calculating taxes. Whatever is the net gain amount is the income.

The three most sought after places in Chennai are also homes to the most popular political leaders, business tycoons and film stars. Some of these locations command astronomical values in real estate and property prices. In recent times, buyers and investors have paid dollar rates to buy property in Boat Club, Poes Garden and Rutland Gate the most sought after places in the city. Valuation of land increases in these locations by the day and expats have started looking for investment opportunities here.

Boat club is home for top business men in Chennai, including N Srinivsan(India Cements), Venu Srinivasan (TVS Motors), Shyam Kothari (Mukesh Ambani’s brother-in-law) and families of business conglomerates like TTK, MRF, Murugappa and Ceebros.

Poes Garden on the other hand houses the bunglow of Chief Minister Jayalalitha, Actor RajniKanth, Pepsico chief Indra Nooyi and the valuations are around Rs 9 crore to Rs 10 crore per ground. Portfolio management experts at Ikia Consulting services are of the view that tough Poes graden was a brand in itself some years ago, valuation wise, boat club will fetch a better deal but in both places one cannot see much development immediately.

HSBC has bought a luxury duplex apartment in Mumbai, overlooking the Arabian sea and the transaction is reported to be the highest reported transaction for a flat in terms of absolute numbers. The 8000 sq ft apartment located in Raheja Viverea development overlooks the Mahalaxmi racecourse and has been bought by the bank to its India chief executive officer, currently Stuart Milne. The bank bought the property directly from K Raheja Corp.

Here re some interesting facts on high value property transactions in Mumbai – In one transaction PE firm Xanders’ founder and chairman Siddharth Yog bought a sea facing apartment at the famous Samudra Mahal building in Worli for Rs 40.5. Another sea-facing duplex apartment in a building on Mount Pleasant road in Malabar Hill was sold for Rs 57 crore (Rs. 1.35 lakh per sq ft) making it the most expensive residential transaction on a per sq ft basis.

Other high-profile figures from the corporate world who have their homes in Raheja Viverea are HDFC vic-chairman and CEO Keko Mistry, private equity firms KKR’s CEO Sanjay Nayar and the missions of Germany, Australia, Canada apart from corporates like Johnson&Johnson and Mondelez India Foods Ltd (formerly Cadbury India) who have bought apartments here for their CEOs.